Parmalat SpA has announced that it settled a securities class action with investors stemming from its stunning collapse in 2003. Under the deal, the Italian dairy giant will distribute 10.5 million shares of stock. That works out to a little less than $40 million, based on Parmalat’s Thursday closing stock price of $3.50. The company also agreed to pay up to $1.55 million as the cost of notifying the class members of the settlement.
“Parmalat believes that this settlement is in the best interests of its shareholders to avoid the distraction and expense of further litigation, and diminishes uncertainty in the value of its stock,” the company said in a statement.
The settlement, which is subject to approval by the U.S. District Court for the Southern District of New York, follows two $25 million settlements reached last summer with Credit Suisse and BNL.
“We are very pleased with the settlement reached with the company, bringing total investor recovery obtained so far in the Parmalat case to approximately $90 million,” says Stuart Grant, managing partner of securities law firm Grant & Eisenhofer, co-lead counsel to Parmalat investors. “We will also continue to press claims against other defendants whom we allege defrauded investors over a period of years prior to Parmalat’s ultimate collapse in 2003.”
Andrea Paladini, an analyst at Banco Santander SA in Milan, told Bloomberg that the news is positive for Parmalat; his forecast had been that Parmalat would have to pay out up to 10 times as much.
Bloomberg notes that lawyers claimed investors had lost as much as $8 billion in Italy’s largest bankruptcy. Remaining defendants in the case include Citigroup and Bank of America, as well as accounting firms Deloitte & Touche and Grant Thornton, along with individuals and Italian law firms.
Last month Judge Jonathan Harris of Bergen County (N.J.) Superior Court ruled that Citigroup must stand trial for its alleged role in the collapse of Parmalat, which is suing the banking company for $10 billion. Parmalat alleges that Citi helped former management hide debt and inflate results.